Did endorsing a Loanliner advance check create a Florida documentary-stamp-taxable written obligation to pay money?

Plain-English summary

Florida treated the endorsed Loanliner advance check as a written obligation subject to documentary stamp tax. The back of the check said that by endorsing it, the borrower agreed to make payments of the amount shown on the accompanying voucher. That language supplied a promise to pay, and the borrower supplied the signature by endorsement.

The Department explained that section 201.08(1), Florida Statutes, applies when a document contains an unconditional written obligation to pay a sum certain in money and is signed by the obligor. A separate document generally cannot be used to determine taxability unless it is expressly incorporated, but the operative promise here appeared on the check itself and pointed to the voucher for the amount.

The taxpayer was therefore instructed to register with the Department to remit the tax.

What this means for you

Credit unions and lenders

Do not assume a check is merely a payment instrument. Endorsement language can turn it into the borrower's signed promise to repay, making the document taxable under Florida's documentary stamp tax rules.

Accountants and tax professionals

Review the face and reverse side of the executed instrument, plus only those separate documents that are expressly incorporated. The wording used to accept an advance can control the tax result.

Common questions

Why was the check taxable? The endorsement adopted an express statement that the borrower agreed to make payments of the amount shown on the accompanying voucher.

Can Florida combine separate loan documents automatically? No. The TAA says a separate document is considered only when it is expressly incorporated into the document being tested.

What did the Department require? It told the taxpayer to register so the documentary stamp tax could be remitted.

Citations and references

• Fla. Stat. § 201.08(1)
• Fla. Stat. § 201.08(6)
• Fla. Admin. Code R. 12B-4.053(6)
• Fla. Stat. § 213.22

Source

• Landing page: Florida Tax Law Library
• Advisement: TAA 99B4-007

Original ruling text

SUMMARY

Section 201.08(1), F.S., imposes the documentary stamp tax
on written obligations to pay money made, executed, and
delivered in this state. The document must contain an
unconditional written obligation to pay a sum certain in
money, signed by the obligor. See Rule 12B-4.053(6),
F.A.C. Pursuant to s. 201.08(6), F.S., taxability of a
document shall not be determined by reference to any
separate document referenced or forming part of the same
contract unless the separate document is expressly
incorporated into the document.

Since the back of the check which the borrower endorses
contains the statement "You agree to make payments of the
amount shown on the voucher accompanying this check", this
constitutes a promise to pay and is subject to the
documentary stamp tax under s. 201.08(1), F.S. Therefore,
you should register with the Department in order to be set
up to remit the tax.

Jul 20, 1999

RE: Technical Assistance Advisement No. 99(B)4-007
Documentary Stamp Tax; Written Obligation to Pay Money
s. 201.08(6), F.S., Rule 12B-4.052(6)(b), F.A.C.
XXX (the taxpayer)

Dear :

This is in response to your recent request for a Technical
Assistance Advisement requesting a determination as to the
applicability of documentary stamp tax to a Loanliner Advance
Request and Security Agreement.

FACTS PRESENTED BY TAXPAYER

The documentation attached to your request consists of a

Loanliner Advance Request and Security Agreement. Part I of the
Loanliner Advance Request document consists of Member
Information, Part II requests a listing of all debts of the
applicant, Part III indicates the payment terms, Part IV is for
Credit Union Use Only, and Part V is filled out by the applicant
when property in addition to the pledge of shares is given as
collateral.

The document labeled Security Agreement contains such terms
as the security for the loan, what the security interest covers,
ownership of the property, protecting the security interest, use
of property, property insurance, taxes and fees, default
provisions, delay in enforcing rights and changes in the
agreement, and continued effectiveness. As in the Loanliner
Advance Request document, there is an area for the applicant to
indicate whether property is given to secure the advance, in
addition to the pledge of shares in the applicant's loanliner
credit agreement. The owner of the property then signs the
agreement, agreeing to be bound by the promises in the security
agreement. Another method of accepting the terms of the
security agreement is for the loanliner account holder to
endorse the check advancing money under the plan. By signing the
back of the check, the borrower agrees to make payments of the
amount shown on the voucher that accompanies the check. If
security and/or a change in terms is described or noted in the
voucher, the borrower's endorsement constitutes acceptance of
the terms of the security agreement and/or the change in the
terms. If the advance will be secured by shares and/or
deposits, by signing the check the borrower pledges the shares
and/or deposit shown in the voucher.

In our telephone conversation in XX 1999, you stated that
no other documents were used by the lender in connection with
the Loanliner Advance Request and Security Agreement. However,
this particular document does contain a statement by the
member's name stating "You request the following advance subject
to the terms and conditions of your loanliner credit agreement".
If a loanliner credit agreement is used, it was not attached to
your request.

REQUESTED ADVICE

Your letter requests an official binding statement as to
the applicability of documentary stamp tax as it pertains to the
Loanliner Advance Request and Security Agreement.

DETERMINATION

Section 201.08(1), F.S., imposes the documentary stamp tax
on written obligations to pay money made, executed, and
delivered in this state. The document must contain an
unconditional written obligation to pay a sum certain in money,
signed by the obligor. See Rule 12B-4.053(6), F.A.C. Pursuant
to s. 201.08(6), F.S., taxability of a document shall not be
determined by reference to any separate document referenced or
forming part of the same contract unless the separate document
is expressly incorporated into the document.

Since the back of the check which the borrower endorses
contains the statement "You agree to make payments of the amount
shown on the voucher accompanying this check", this constitutes
a promise to pay and is subject to the documentary stamp tax
under s. 201.08(1), F.S. Therefore, you should register with
the Department in order to be set up to remit the tax.

This response constitutes a Technical Assistance Advisement
under s. 213.22, F.S., which is binding on the Department only
under the facts and circumstances described in the request for
this advice as specified in s. 213.22, F.S. Our response is
predicated on those facts and the specific situation summarized
above. You are advised that subsequent statutory or
administrative rule changes or judicial interpretations of the
statutes or rules upon which this advice is based may subject
similar future transactions to a different treatment than
expressed in this response.

You are further advised that this response, your request
and related backup documents are public records under Chapter
119, F.S., and are subject to disclosure to the public under the
conditions of s. 213.22, F.S. Confidential information must be
deleted before public disclosure. In an effort to protect
confidentiality, we request you provide the undersigned with an

edited copy of your request for Technical Assistance Advisement,
the backup material and this response, deleting names, addresses
and any other details which might lead to identification of the
taxpayer. Your response should be received by the Department
within 15 days of the date of this letter.

Sincerely,

Joy B. Eldred, C.P.A.
Tax Law Specialist
Technical Assistance and Dispute Resolution
Office of the General Counsel

JE/mh